The effect of a decrease in interest rates by the RBA is likely to be that the:
A) AD curve will shift left.
B) AD curve will shift right.
C) AS curve will shift right.
D) AS curve will shift left.

Question

Quizplus · Accepted Answer

A decrease in interest rates by the RBA will encourage consumers and businesses to borrow more and invest/spend more, thus increasing consumption and investment. This increase in spending will shift the aggregate demand (AD) curve to the right, resulting in higher output and employment.

The Effect of a Decrease in Interest Rates by the RBA